ALBERT

Notes: This paper considers the problems peculiar to options on real estate, because of the special set of institutional factors influencing real estate markets. It is intended to serve as a reply to Johnson and Wofford [15] as well as provide an overall critique of option-pricing models in a real estate context. Our major point is that a variety of real estate decisions, such as the abandonment decision, the option to refinance, or the option to exercise a contingent real estate purchase contract, may be modeled using option-pricing techniques. However, both the theoretical and institutional aspects of real estate markets must be taken into account in both developing and applying option models in a real estate context.

Notes: This paper values the real estate option to purchase contract in a contingent claims framework. The model is an application of the Black and Scholes option pricing model. Observed market data on the sale of condominiums are used to test if the option is competitively priced under various assumptions regarding the expected instantaneous variance of the condominium price. Simulation results suggest that standard industry practices of charging a fixed amount for the option to purchase roughly conform to pricing behavior dictated by the option pricing model.

Notes: A new Section 2036(c), the antifreeze law, has been added to the Internal Revenue Code. This new law dramatically changes the tax consequences of many transactions intended to pass all or a portion of a family business on to the next generation. This article explores the mine field laid out by the anti-freeze law and charts a variety of safe passages.

Notes: This paper utilizes a joint distribution model of labor and nonlabor income that allows us to analyze the impact of demographic change in the U.S. on the marginal distributions of these two income components over time. The beta distribution of the second kind is the hypothetical statistical distribution used in this study to approximate the observed income graduation. This distribution is sum stable which allows us to compare and contrast the marginal distributions in a consistent manner, a property most hypothesized functional forms of income distribution do not possess. We are in effect using a hyperparameter model to do our estimation. We examined the impact of changes over time in labor force participation and population on the marginal distributions of labor and nonlabor income. We disaggregated the variables by sex and age cohorts and found that changes in the age distribution and in the labor supply behavior of women in particular has had a significant effect on the marginal income distributions over time. We also found that the results vary when we examined overall changes in the labor force participation rate vis a vis changes in women's labor force participation separately. The findings are consistent for both income components.

Notes: This paper provides estimates of the effects of inflation in Canada on the reported rate of return in manufacturing from 1966 to 1982. It provides estimates for several different concepts of rate of return (both for all assets, whether financed by equity or debt, and for the narrower equity to the owners) and for both a narrow and wide range of financial assets. Comparisons are made with similar studies for the United Kingdom. Such studies show that reported profits are overstated and total assets are undervalued during and after periods of inflation with traditional accounting concepts relative to an economic concept designed to maintain the firm as an ongoing entity.The paper also discusses a number of factors that have contributed to the marked drop in the rate of return in Canadian manufacturing when both income and assets are valued at replacement costs. Some of these factors are also present in the other industrialized countries, such as increased raw materials prices, and a slower increase in productivity. Other factors have been relatively more important in Canada than in other countries, such as the historically higher level of production costs in Canada than in the United States and Japan, the two most important countries in Canadian trade. This is important during a period of tariff reductions when international competition in manufactured products is widespread.Although corporate profits and the adjusted profits rates of return were depressed by the severity of the 1981-82 recession, some of the key factors depressing the rates of return are longer-term in nature. A continued persistence of these factors during the balance of the 1980s could contribute to restraint in business investment in manufacturing when total returns on a replacement cost basis are so much below the corporate long-term cost of capital.This paper applies the concepts of inflation accounting to total Canadian manufacturing for the period from 1966 to 1982. Measures of rates of return for individual years are provided, both on the basis of total assets and on the basis of the net assets attributable to the owners. There are four sections in the paper after an introduction. Section 2 is a brief conceptual statement and outlines the methods. Section 3 makes comparisons with similar studies for the United Kingdom and summarizes the results of this and other studies. Section 4 discusses the environmental factors for Canadian manufacturing that appear to contribute to the lower rates of return in recent years. Section 5 discusses the implications of the results for future business decisions.

Notes: National accounts in their present form do not serve very well as a framework for microdata, largely because of differing concepts and coverage in the macro and micro data. This article identifies the differences in sectoring and the handling of imputations and attributions between macro and micro data, and then proposes a form of presentation of the macro accounts that will facilitate their integration. Data for the United States in 1980 are used as an illustrative example. The final section explores the consequences of the proposed alterations in the macro accounts for the analysis of saving and investment and the accumulation and distribution of wealth, using U.S. data for the period since 1947. The article concludes that the proposed alterations do lead to new analytical insights, and further, that in their present form the national accounts are both misleading and inadequate.

Notes: In the Netherlands the Central Bureau of Statistics (C.B.S.) carried out two experimental investigations into the possibility of observing the actual value of the capital stock by means of enquiries at enterprises.This article reports on the investigation into the cigar-industry. The intention is to carry out enquiries in one branch of industry after another. In due course (for instance after 10 years) it will again be the turn of the first branch of industry and so on. There are also branches of industry which have a fair amount of information regarding capital assets available at their disposal, so that enquiries are not necessary. In the long run the method described will supply statistical data on the value of the capital stock for all branches of industry together.The gross actual value at current and constant prices is calculated for the cigar-industry, broken down by type and vintage. The enquiry was carried out in two steps. Questionnaires were not sent to the enterprises but they were visited in order that C.B.S. staff could derive the data required from the accounts available. Within the C.B.S. this information was processed, C.B.S. staff making estimates for lacking data. It may be concluded that this method of enquiry for the capital stock is difficult but useful. The results of the enquiry are comparable throughout, the valuation having been carried out in the same way for all enterprises and care having been taken that in each enterprise all means of production were asked for.In the future this new technique of enquiry will provide good detailed information on the capital stock in the Netherlands.